Introduction
Thinking of selling your house? Whether you’re upsizing, downsizing, or moving on to pastures new, the question of your mortgage inevitably arises. The good news is, absolutely, you can sell your house with a mortgage! In fact, it’s a very common scenario. However, there are some additional considerations compared to a mortgage-free sale.
How Does Selling a House With a Mortgage Work?
Selling a house with a mortgage involves a few additional steps compared to a mortgage-free sale. Here’s a simplified breakdown of the process:
- Preparation and Valuation: You’ll need to get your house valued to determine a realistic selling price that covers your outstanding mortgage balance. Ensure you factor in selling costs like estate agent fees and solicitor fees.
- Market and Sell: Your estate agent will market your property and handle viewings. Once you receive an offer and it’s accepted, the conveyancing process begins.
- Conveyancing: Your solicitor will handle the legal transfer of ownership. They’ll liaise with your mortgage lender to obtain a redemption statement outlining your remaining mortgage balance.
- Completion: Once all legal checks are complete and funds are secured, completion takes place. Your mortgage is paid off from the sale proceeds, and any remaining funds are yours.
What Happens to Your Mortgage When You Sell Your House?
When you sell your house, there are a few ways your mortgage can be handled:
- Pay it off: This is the most straightforward option. The proceeds from your house sale will be used to settle the outstanding balance on your mortgage. Any remaining funds will be yours to keep.
- Port your mortgage: If you’re planning to buy another property, you might consider porting your existing mortgage to your new home. This involves transferring your current mortgage deal to your new property, potentially saving you money on arrangement fees and securing a favourable interest rate.
- Refinance: You may choose to take out a new mortgage on a different property, depending on your financial situation and the specifics of your current mortgage.
What is Porting a Mortgage?
Porting a mortgage involves transferring your existing mortgage deal to your new property. There are usually limitations on how much you can borrow compared to the original property value and the new property’s value. Porting can be a good option if you have a favourable interest rate on your current mortgage, and it can save you money on arrangement fees for a new mortgage. However, it’s important to ensure the ported mortgage suits your new property and financial circumstances.
Should I Pay Off My Mortgage or Port?
The decision of whether to pay off your mortgage or port it depends on your individual circumstances. Here are some factors to consider:
- Porting Eligibility: Not all mortgages are portable. Check with your lender to see if your current deal allows porting.
- New Interest Rate: Compare the interest rate on your existing mortgage with the current market rates. If you can secure a significantly better deal with a new mortgage, porting might not be the most economical option.
- New Property Value: The amount you can borrow when porting is usually linked to the value of your existing property and the value of your new property.
- Future Plans: If you plan to move again soon, porting might not be ideal. However, if you plan to stay in your new property for the long term, porting could be a good option.
What to Consider Before Selling a House With a Mortgage
Before putting your house on the market, here are some key points to consider:
- Market Value: Knowing the current market value of your property is crucial. An accurate valuation ensures you achieve a selling price that covers your outstanding mortgage and leaves you with a profit.
- Mortgage Balance: Understanding your remaining mortgage balance is essential. You’ll need to factor this into your selling price to ensure a smooth sale.
- Early Repayment Charges: Some mortgages have Early Repayment Charges (ERCs) if you pay them off before the end of a fixed term. Check your mortgage terms for any potential penalties.
- Selling Costs: Factor in estate agent fees, solicitor fees, and Energy Performance Certificate (EPC) costs when determining your overall selling expenses.
Do I Need to Pay Early Repayment Charges?
Whether you’ll incur Early Repayment Charges (ERCs) depends on the terms of your specific mortgage. Many fixed-rate mortgages come with ERCs during the initial fixed term. These charges typically decrease over time, eventually disappearing altogether once the fixed term ends. Always refer to your mortgage agreement or contact your lender for clarification on any potential ERCs.
Will I Need to Tell My Mortgage Company That I am Selling My House?
Absolutely. Your mortgage lender needs to be informed when you’re selling your house. They will be involved in the conveyancing process, which is the legal transfer of ownership. They will provide your solicitor with a redemption statement detailing your outstanding mortgage balance.
Conclusion
Selling a house with a mortgage is a common process, but it involves additional considerations compared to a mortgage-free sale. By understanding your options, such as paying off your mortgage, porting, or refinancing, and by carefully considering factors like market value, mortgage balance, and potential fees, you can make informed decisions throughout the selling process. View our property selling page for information on how you can quick-start your property sell with us.
If you have any further questions or require assistance with selling or buying your home, don’t hesitate to contact Michael Anthony Estate Agents. Our team of experienced professionals is here to guide you through every step of the process, ensuring a seamless and stress-free experience.
For personalised guidance on selling your property in the UK, consider consulting with Michael Anthony Estate Agents who can provide expert advice tailored to your specific circumstances.